Property manager requiring two checks: one to the company and one to the CEO

I own a rental property in a multifamily building, and whenever anything is needed from the property manager, if the property manager can charge a fee, the property manager requires two checks: one written to the property management company and another check written to the property management company's CEO. For example, when I submitted a repair request that involved a fee, I was told to give two checks: one to "Smith Real Property Management, Inc." and one to "John Smith" individually.

This seemed shady, so I asked the board about it. The board said that the property management agreement allowed the property manager to increase or add fees at any time, and that the board has no control over those fees.

That seemed ridiculous. Is it standard for property managers to require payments to be made to an individual who works at the property management firm in addition to payments to the HOA or the property management firm? And is it standard for HOA boards to let property managers charge whatever they want, payable to whomever they want?

I would think that the property management firm would need to get its fee schedule approved by the HOA board in advance.

The state is NY, and I know that a lot of shady practices go on with NY real estate, but this just seems brazen.

Thanks.

It sounds weird, but you need to take a look at the contract itself - actually, your lawyer should have a look. If it allows the manager to increase fees at any time, that may be referring to services outside the usual terms of the contract. As a homeowner, you should be entitled to review certain association documents, so make your request in writing - double-check your documents (the Bylaws and CCRs) to be certain.

That said, this contract is between the association and the property manager, not individual homeowners. It's true that the board can't control what the manager charges - it approves the contract enabling the property manager to provide services and if they have concerns about the costs, they either negotiate something or find another property manager.

There are management companies that manage condos and HOAs as well as rental. What an eye opener.

What is a "superintendent?" Are they an onsite community manager? Is the superintendent somehow on the Board of Directors?

Do you pay the CEO over $600 in a year?

If you do, ask for a social security number and issue a 1099-misc to the CEO.

The board should not have given up the repair decisions to the management company. It is the boards' responsibility with the assistance of the management company to determine maintenance.

I hadn’t thought of that. That’s a great idea!